Do these advance preparations before filing income tax return (ITR)
There are certain advance preparations which you have to carry out before you actually sit down to fill up and upload your income tax return (ITR) or visit your Chartered Accountant. Let us discuss how you can prepare in advance for your ITR.
For those who have interest income
For those who have made fixed deposits with banks, it is better to obtain the yearly interest certificate for the year ended 31st March 2021 and reconcile it with your own working to ensure that interest is correctly credited in your income from those bank fixed deposits. You can also cross check the same with the amount credited in your bank account for deposits matured during the year or where they are paying monthly interest. In case of cumulative deposits where there is no entry in your bank account, you have to offer the interest accrued for the year on such bank deposits if you have opted for accounting for such income on accrual basis. The interest certificate will help you to find out such accrued interest. Likewise, for all those fixed deposit matured and reinvested directly, you have to show the interest for the year in your ITR in case you follow accrual method for interest. In case you have been following cash method, you have to include the entire interest component comprised in the such fixed deposits without you having received any amount in your bank account as interest in such case is assumed to have been received by you.
For those who are salaried
Since the last date for furnishing the form 16 to employees as extended till 31st July 2021 is over you all must have received your Form No. 16. Please check form 16 for correctness as to the amount of exempt income like House Rent Allowance (HRA) and Leave Travel Assistance (LTA). You should also check various deductions mentioned in it to ascertain that all the details/documents submitted by you have been considered. It may happen that the employer has not taken into account the documents if the same were submitted late or have just been ignored due to oversight resulting in excess tax deduction. The documents may relate to items like rent receipts, documents for claim of LTA, life insurance premium, health insurance premium, home loan repayment, interest on education loan or school fee etc. This is very important because the consultant who files your ITR will only take into account the deductions as mentioned in form no. 16 in all probability. In such a case bring it to the notice of the consultant by putting a remark on the copy of the form 16 itself.
Please also reconcile the gross salary as mentioned in form no, 16 with your monthly salary slips. You should also closely verify your salary slips with the bank statement after taking into account various deductions like PF, Profession tax and income tax etc.
If you are engaged in business or profession
In case you are engaged in business or profession, first, you need to check whether you are eligible for a presumptive scheme of taxation. In case you are not so eligible, you may have to get your accounts audited. For getting your accounts audited you need to appoint an auditor and take out some details to be furnished to the auditor to complete the audit well in time.
In case your business receipts are subject to tax deduction at sources (TDS), you need to reconcile the amount of TDS between form 26AS and as per your books of accounts. There is bound to be difference between these two numbers. There may be many reasons for such difference, major among those is accounting of invoices in different accounting years specially those for the last month of the year or due to non-deposit of TDS by the deductor.
For those having capital gains income
In case you have capital gains from direct equity shares or mutual funds, you will have to obtain the statement of accounts from brokers/mutual fund to verify that all the transactions are considered while computing the capital gains. Some of these transactions like Systematic Transfer Plan (STP) in mutual funds may not reflect in your bank and thus may go unreported. Likewise, some intra-day transactions may also get omitted where some shares have been bought against shares sold on the same day which is not fully reflecting in your bank statement. The next step is to get capital gains statement from your mutual fund house to correctly compute your capital gains from various categories of mutual funds taxable at different rates.
Verification of transactions with form No. 26AS
All the taxpayer need to download their latest form No. 26AS and verify that all the transactions as reflecting in it are duly considered while computing your taxable income. You also need to account for all the income for which TDS is reflecting in this form. Since the content of 26AS now also include various financial transactions it is advisable to verify that all such transactions recorded in 26AS belong to you and have been considered by you while computing your taxable income.
I am sure this advance preparation will help you in better compliance with tax laws.
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